The battle between Jane Street and has triggered a larger question: How far must a regulator go in disclosing documents during enforcement action? At the heart of the dispute is whether SEBI can withhold reports it did not formally rely on while passing its interim order, but which could support the defence.
“SEBI faces a tricky legal position regarding document withholding,” said Ashutosh Srivastava, partner at SKV Law Offices. “The regulator cannot selectively withhold exculpatory evidence like the December 2024 surveillance report that allegedly cleared Jane Street.”
The markets regulator does retain limited protection for genuinely confidential third-party information and market-sensitive data; this, however, cannot be used as a blanket shield, particularly when SEBI’s own surveillance department has reached contradictory conclusions, Srivastava said.
Documents withheld
“Traditionally SEBI limited disclosure to documents it relied on, but the Supreme Court rulings now require it to disclose all documents ‘relevant’ and ‘material’ to the defence, unless there is a compelling reason such as third-party confidentiality or market stability,” Alay Razvi, Managing Partner at Accord Juris, said.
In fact, if the undisclosed reports prove Jane Street’s claim of getting a clean chit, the regulatory inconsistency strengthens the firm’s case. “Courts have consistently favoured broad disclosure and regard suppression of exculpatory evidence as a violation of natural justice, supporting Jane Street’s position,” Razvi said.
“Where withheld documents have a direct and probative nexus to the allegations, or expose material inconsistency in the regulator’s stance, SAT may invoke its equitable jurisdiction to compel selective disclosure,” Yash B. Joglekar, Counsel, Bombay High Court, said.
Further more, Jane Street’s appeal targets eroding SEBI’s credibility before the Tribunal than in constituting a substantive defence to the charge of manipulation, he said.
Preliminary findings
Some argue SEBI may still draw the line at preliminary and non-binding findings, which cannot stop the regulator from revisiting matters upon the emergence of fresh incriminating data.
The Supreme Court has recognised legitimate exceptions for documents to be withheld on reasonable grounds, including confidential information, internal memos and data about third-parties that are not related to the case, said Ankit Rajgarhia, Designate Partner at Bahuguna Law Associates.
By the next hearing on November 18, SAT is expected either to order a partial release of external reports or to uphold SEBI’s stance and move forward on the validity of the July interim order.